13 - Fiscal Policy Definitions Flashcards
Public Sector Borrowing
Another name for the fiscal deficit, as increased borrowing is typically used to fund the public sector.
Demand Side Fiscal policy
Fiscal policies which aim to increase or decrease aggregate demand.
Deficit Financing
Filling a budget deficit with borrowing.
Expansionary Fiscal Policy
The government using fiscal policy that has the aim of growing the economy - increasing government spending or lowering taxes.
Contractionary Fiscal Policy
The government reducing spending and/or increasing taxes to stop the economy growing too quickly.
Discretionary Fiscal Policy
The government changing levels of taxation or government spending.
Sovereign Debt Problem
The failure of a government to repay its’ country’s debts.
Supply side fiscal policy
Government policies which aim to shift the long run supply curve of an economy.
National Debt
The total amount of money a country owes to its’ creditors.
Cyclical budget deficit
The amount that spending is more than tax revenue, when the economy isn’t performing well.
Cyclical budget surplus
Surplus caused by a growing economy rather than fiscal policy.
Structural budget deficit
When an excess of public spending persists, when an economy is at its’ full potential.
Progressive Taxation
Taxes which mean the lowest paid pay less tax, and the highest paid pay more tax.
Principle of Taxation
The benefit principle - there should be some equivalency between what an individual ends up paying, and the advantages they receive. Ability to pay - taxes should be dependent on means to pay.
Regressive Taxation
Everyone will pay the same rate, so lower paid are worse off.
